Rogue retailers getting benefits from food stamps

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Within the ranks of merchants accepting food stamps are convicted criminals who have previously been caught stealing cars, committing armed assault and selling drugs.

Although strict, long-standing federal rules are supposed to prevent known thieves and cheats from participating as retailers in the food-stamp program, the U.S. Department of Agriculture rarely banishes them from the lucrative market, an eight-month Scripps Howard News Service investigation has found.

State and local law enforcement officials who have built cases against the rogue retailers -- who often also trade in black-market cigarettes and sell stolen items such as baby formula or razor blades -- are frustrated that taxpayers' money continues to line the merchants' pockets.

"The people doing this are criminals," said Bill Chandler, who retired in 2009 as the director of the North Carolina Department of Public Safety's alcohol-enforcement division, and is now an agent with the Sanford, N.C., police department. "They will do anything they can to make a dollar."

Scripps reporters documented in early 2012 how the USDA has allowed storeowners previously caught engaging in food-stamp fraud to slip unnoticed back into the federal program. In response, the USDA promised to institute stronger oversight, opened a criminal investigation on a case identified by Scripps, and booted another seven stores identified by Scripps from the rolls.

Scripps also identified eight individuals who are under active criminal investigation for food-stamp fraud and other crimes but whose stores remain in business, and another 27 stores whose owners have been caught violating the spirit of federal anti-fraud rules -- by, for example selling black-market cigarettes and liquor, or obstructing investigations.

When Scripps presented a sampling of the criminal histories to the USDA in July, the agency said it would investigate.

On Thursday, the USDA said it had removed one of those stores from the program for a year, after which it can reapply. The agency also said it has begun the process to bar two other stores identified by Scripps.
When the reporter first presented the USDA with the storeowners' records histories this summer, the agency wouldn't say why it didn't already know about them. One possible explanation is that the agency has only 100 agents to oversee the roughly 244,000 stores currently in the program nationwide.

Another could be that the agency doesn't know about the criminal pasts. The USDA admits it does not perform the background checks that would bring to light such violations.

In fact, agency officials have for years rejected calls to conduct such criminal-history searches, arguing that it does not have the legal authority to do so.

At a U.S. House committee hearing in March, Kevin Concannon, the USDA's food-stamp chief, explained to lawmakers that his agency cannot conduct fingerprint background checks because it does not have access to the FBI's National Crime Information Center, which is the national repository of criminal histories.

"One has to be a law-enforcement agency in order to access those data," said Concannon, under secretary of the USDA's Food and Nutrition Service. "We can't do it."

But that position doesn't satisfy critics, including lawmakers and the agency's own internal watchdog, the Inspector General's office, which has urged the USDA to conduct such checks.

Concannon and other USDA officials declined on-the-record interview requests for this article. But, in written responses to questions and specific examples provided by Scripps of storeowners with criminal histories, the agency acknowledged violations.

"USDA has a zero tolerance policy when it comes to fraud," the agency said in a written statement, adding that it's "critically important" to keep those with a history of theft and fraud from owning stores allowed to take food stamps.

"Oversight and management of the retailers authorized to redeem SNAP benefits is something the department takes very seriously," the statement said.

But Scripps, which has no access to the NCIC records, was able to pinpoint storeowners with criminal convictions -- unidentified by the USDA -- by cross-referencing state disciplinary, police and court records against the USDA's list of stores permitted to take food stamps.

The Scripps search revealed, for example, that Toledo, Ohio, storeowner Ghassan Abdelkarim in 2009 was convicted of allowing customers to swap food stamps for cigarettes, and to use them as payment for hundreds of dollars of debts they had accrued with him, according to court records and interviews with Abdelkarim, his lawyer and Ohio state authorities.

This spring, Abdelkarim's store, Downtown Variety, was also caught selling an illegal, marijuana-like drug known as "K2" or "Spice," said agent Brian Sargent, of the Ohio Department of Public Safety's Investigative Unit. On Nov. 29, Abdelkarim was charged with two counts of drug trafficking, Toledo Municipal Court records show.

As of mid-December, Abdelkarim continued to operate Downtown Variety, according to the Lucas County, Ohio, health department, which regulates convenience stores.

By the USDA's own food-stamp rules, Abdelkarim should have been booted from the program after his first conviction. Federal regulations call for permanently ejecting storeowners who have been convicted or punished via a civil suit for any of a long list of offenses, including fraud, theft, trading in stolen property, and violating tobacco and liquor licensing laws.

The USDA also may issue lesser suspensions for offenses that tarnish a business owner's honesty -- such as cheating on taxes or running illegal casinos -- but don't result in a criminal conviction or civil judgment.
In response to Scripps' questions, USDA officials confirmed that Abdelkarim's criminal history should, "absent mitigating circumstances," result in permanent removal from the food-stamp program. However, the agency did not say if, or when, it planned to pull Abdelkarim's food-stamp access.

Until Abdelkarim was caught, he never understood that what he was doing was a problem, said his attorney, Paul Accettola. He said Abdelkarim never mentioned the food-stamp incident to USDA officials -- and has never been questioned by anyone at the agency about it.

"There is a breakdown of communication," Accettola said.

What's more, the USDA doesn't have clear authority to permanently remove some shady merchants because the regulations under which it operates permit only suspensions for some offenses.

For instance, Scripps identified 27 storeowners across the country who were caught by state regulatory agencies for such offenses as running illegal casinos, illegally selling weapons, or cheating on tens of thousands of dollars in taxes.

But because Scripps could find no corresponding criminal conviction or civil judgment against those merchants, it's unclear if the USDA has the power to boot them permanently. In these instances, agency rules state that storeowners may receive, at a maximum, a one-year food-stamp suspension for such offenses.
USDA officials declined to answer questions about this apparent gap in regulatory authority.

However, Scripps found other cases where the federal rules apply more clearly.

In reprimanding a Mendota, Calif. merchant for selling liquor to a minor then lying about it to authorities in 2003, an administrative law judge wrote that Karanjit Singh's behavior "indicates a lack of remorse and integrity, which is not reassuring," California Department of Alcoholic Beverage Control disciplinary records show.

The Fresno County District Attorney sued his store, El Charro Food Mart, resulting in a $1,000 fine, California Superior Court records show. This judgment should have disqualified Singh from the food-stamp business, according to federal regulations.

He has since been reprimanded by the state liquor board for other infractions.

In an interview, Singh acknowledged the violations and said that each one was an accident. He would not say if he reported the incidents to the USDA.

In September, two months after Scripps informed the USDA of the storeowners' violations, the USDA revoked El Charro's food stamp license for "business integrity reasons," the agency said Thursday, adding that the storeowners may reapply in a year.

Across the country, in Jupiter, Fla., another merchant with a checkered past has evaded USDA oversight.
Francisco Perez -- who would one day be approved by the USDA to be a food-stamp merchant -- lost his liquor license in 2005 after state officials conducted a background check.

They found that Perez had come to the U.S. illegally in 1991 and the next year was convicted of stealing a white El Camino, according to Lake Worth, Fla. police records, Palm Beach County circuit court records and a Sept. 30, 2005 letter Perez wrote to the Florida Department of Business and Professional Regulation's Alcohol division, confessing to his history.

Then, in 2007, Perez stabbed a man so severely at a nightclub that the victim had to be flown by helicopter to a hospital, according to Palm Springs, Fla. police records. For that case, Perez was convicted in 2009 of improper exhibition of a dangerous weapon, a first-degree misdemeanor, according to Palm Beach Circuit Court records.

In 2008, in between that arrest and conviction, Perez applied to become a food-stamp merchant. Records show he owned two South Florida stores, Carniceria La Tamaulipas 1, in Jupiter, and Carniceria La Tamaulipas 2, in Stuart.

Perez did not respond to numerous interview requests from Scripps.

The USDA approved him -- even though, the agency now says, his 2005 liquor license revocation "may have been grounds" for rejecting him.

But, because no background check was performed, the agency knew nothing about it. (The agency also says Perez' failure to inform the USDA about that infraction by itself could constitute grounds for rejection.)
Until informed by Scripps in July, the USDA also had no knowledge of Perez's 2009 criminal conviction -- again, because no criminal check was done.

Responding to Scripps' findings, the USDA has begun the process to bar those two stores from taking food stamps, the agency said Thursday.

Until a USDA administrative review of the stores is complete, the stores will be permitted to serve food-stamp customers.